Chinese Exporters Now Cling to Dollars

Many Chinese exporters are starting to hoard the dollars they earn, betting that the yuan is unlikely to appreciate much more, a change in strategy that is having a ripple effect throughout the country's financial system.

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Many Chinese exporters are starting to hoard the dollars they earn, betting that the yuan is unlikely to appreciate much more, a change in strategy that is having a ripple effect throughout the country's financial system.

WASHINGTON: The slide continues. China's currency fell further Wednesday, keeping global investors on edge. The yuan slid 1.6 per cent on top of a 1.9 per cent drop engineered Tuesday by the Chinese government. The currency's nosedive is giving investors plenty to worry about: The risk the Chinese economy, the world's second-biggest, is weakening even faster than expected. The threat that a cheaper yuan poses to exports and economic growth in other countries. The possibility that China's move will trigger a beggar-thy-neighbor currency war.

NEW DELHI: The Indian rupee is likely to slide below 65 to a dollar in the near term, pressured by China's move to artificially devalue its currency by about 2 per cent on Tuesday and the prospects of a likely interest rate lift-off by the US Federal Reserve, analysts say. The partially-convertible rupee weakened to as much as 64.85 per dollar, its lowest level since September 2013, as China's move to devalue the yuan sparked fears of a global currency war.

BEIJING: China rattled global financial markets Tuesday by devaluing its currency, an effort, in part, to revive economic growth. The yuan's value declined 1.9 per cent, its biggest one-day drop in a decade. The move could help Chinese companies by making their products less expensive in global markets. US stocks plummeted, partly on fears about a worsening economic slowdown in China. WHAT EXACTLY DID CHINA DO? China doesn't let its currency trade freely in financial markets as the United States does. Instead, it links the yuan's value to the US dollar.

Several months ago, when Russia announced the much anticipated "Holy Grail" energy deal with China, some were disappointed that despite this symbolic agreement meant to break the petrodollar's stranglehold on the rest of the world, neither Russia nor China announced payment terms to be in anything but dollars. In doing so they admitted that while both nations are eager to move away from a US Dollar reserve currency, neither is yet able to provide an alternative.

NEW DELHI: China's unexpected decision to devalue the yuan in a bid to boost sluggish overseas sales has come at a particularly bad time for India, experts said. It's also raised the possibility of a currency war as countries battle for a share of the slow-growing global export market. India's exports have contracted for the past eight months amid an erosion of competitiveness, impacting domestic recovery and also potentially threatening the Narendra Modi government's Make in India programme.